I remember sitting in my office in 2006 in Downtown Tampa watching all the cranes slapping up new condo buildings like there was no tomorrow. It turned out that there really was no tomorrow as soon the market was glutted with housing without enough buyers to fill them. The story was the same all over the country. Housing inventory was through the roof.
A Shock to the System Read More »
In addition to all of the consulting work we do for smaller investors and larger investors, we have our own funds, manage the funds of other entities, and we have a real estate practice that operates on the West Coast of Florida. It’s that real estate sales practice that gives us some of the most important information. It’s a canary in a coal mine, and I don’t mean the awesome song by The Police
Canary in a Coal Mine Read More »
There is an old saying that goes “If you’ve been sitting at the poker table for more than 15 minutes and you don’t know who the patsy is, you’re the patsy.” That’s pretty harsh, but it’s true. So many note and real estate investors try to jump into the market with both feet without having a strong background in the field only to make mistakes. The problem with making mistakes with a 6-figure property is that it can be a very expensive mistake. I’ve made mistakes. I call my mistakes “tuition”…very expensive tuition.
In our last installment, we talked about what debts lenders count towards your debt service coverage ratio or your debt to income ratio. In this article, we’ll look at the other side of the equation, your income.
Banks and the Income Calculation Read More »
Most people find bank underwriting guidelines to be very confusing. When many apply for loans, they are filled with self-doubt and questions as to whether they will be approved or not. The single most important factor in determining whether a borrower qualifies for a loan is arguably not the borrower’s credit history or the collateral value. Most lenders feel the borrower’s ability to pay is the single most important factor that goes into the loan approval process. At the center of this question is the ratio of the borrowers debts in relation to their income which is called Debt to Income Ratio (or DTI) on consumer loans for Debt Service Coverage Ratio (DSCR) for commercial deals. Many, however, find the formula a mystery. Let’s demystify it by first looking at what debts are included in the calculation.
What Debts Go Into the Debt to Income Calculation? Read More »
Getting financing for your first few flips can be quite expensive. As I’ve mentioned in earlier posts, banks and federal banking regulators absolutely hate to lend to smaller real estate investors. The struggle that many newer investors have is that they are accustomed to seeing the rates that are being charged to owner-occupant home buyers. They fail to take into account the level of relative risk to a lender that a real estate investor imposes on the institution, therefore, they struggle to understand why rates for real estate investors are higher than they are for owner-occupants.
How Lenders Make Money Read More »
Most real estate gurus really tick me off. People looking to make a better life for themselves and their family decide that the gateway to make their dreams come true is real estate. They sign up for a “free” seminar at the Days Inn and the first thing that they are told to do is to call your credit card company during the break and up your limits. When you return they have you run to the back of the room to pay for “training” that will be the only way you can find out the secrets of real estate riches. The trouble is that the “training” and the trips to the back of the room never stop. You also never get any closer to learning how to be an investor, a note buyer, a wholesaler, or whatever you are wanting to be. One thing that they do drill into you is that “it’s all about the cash flow…don’t worry about the debt,” but is that right?
Getting into wholesaling is not for the faint of heart. It’s exciting, but it’s full of heartache and anguish. The internet is full of advice on how to be a wholesaler. We’re not going to teach you that in this article, but we are going to give you five things to take to heart as you enter the wonderful world of wholesaling.
5 Tips to Becoming a Better Wholesaler Read More »
